Steel Pipe Industry Beneficiary of key sectors growth

Company Profile
Steel Pipe Industry (ISSP) was founded in 1971 as a joint-venture between a local company, Itochu Corporation and Kawasaki Steel Corporation. In 1989, the company was acquired by Ibnu Susanto, a seasoned steel entrepreneur. In 1998, the company merged with PD&I Rajin, a steel pipe producer with the same owner. Constructions pipe, oil and gas pipe, and automotive pipe contributes to 60%, 10% and 5% of its FY12 revenue, while the rest consists of high end furnitures, home apparels, industrial pipes, pole, and plates.

Highlights
Strong position in construction market
ISSP is the market leader with around 40% market share in the construction pipe market. Demand for construction and infrastructure pipes will be supported by the execution of Indonesia’s 15-year Economic Masterplan (MP3EI) projects as well as other infrastructure and building development by government and private sector.

The group’s wide range of products are used in the construction of infrastructure and buildings, which include – but not limited to – scaffolding, jetty pilings, ceiling frames, dome frames, hydrants, electricity distribution and telecommunication cable poles, water distribution, power plant machinery and fencing. High-rise buildings, hospitals, schools, airports, jetties and ports are all examples of building types that use the group’s construction products.

Opportunities aplenty in O&G
Numerous projects such as ongoing Perusahaan Gas Negara (PGAS, BUY, TP: IDR6,500) projects and incoming Pertamina Gas (Pertagas)’s IDR2trn Semarang-Gresik pipeline are expected to boost oild and gas sector demand. We expects revenue from these sector to grow by double in FY13 and by 50% in FY14 from a low base in FY12. ISSP stands to gain a bigger slice of the market too after the number of players dropped to three (from five) after some firms failed their certification audits in the end of last year.

Positives development in the automotive markets
Massive investments in 2012 in the automotive and autoparts industry as well as increasing local content requirements boost domestic demand for automobile pipes by more than 20.0-30.0% per year in 2013-2014. The company is one of the major three players in automotive segment.